A battle is brewing in the oil market.

What happened

Shares ofAnadarko Petroleum(NYSE:APC) surged more than 11% by 9:45 a.m. EDT on Wednesday after rivalOccidental Petroleum(NYSE:OXY)took its offer to acquire the oil company public. Occidental is bidding $76 per share in cash and stock for Anadarko, which trumpsChevron‘s(NYSE:CVX) $65-per-share agreement to acquire the company.

So what

Occidental Petroleum confirmed recent reports that it had been trying to acquire Anadarko Petroleum. The company made public a letter to Anadarko’s board, which stated that it had presented three acquisition proposals to the company since late March, each one superior to Chevron’s $65-per-share transaction. Its most recent offer was for $76 per share — comprised of 40% cash and 60% stock — which it made the day before Anadarko agreed to Chevron’s proposal. The company reiterated that offer in a letter to Anadarko’s board, though it increased the cash component to 50% of the deal’s value.

Image source: Getty Images.

Occidental not only believes it’s offering Anadarko a superior value but that the combination makes more compelling strategic and financial sense. For starters, Occidental thinks it can extract more value out of Anadarko’s position in the Permian due to its best-in-class operations. On top of that, the combination would generate $3.5 billion in cost savings and other synergies, which is $1.5 billion more than Chevron estimates it can extract from the deal.

In addition to making its offer public, CEO Vicki Hollub went on CNBC to state Occidental Petroleum’s case. She said: “We are the right acquirer for Anadarko Petroleum because we can get the most out of the shale.” Hollub also downplayed analysts’ perception that Anadarko was a less-than-ideal strategic fit for Occidental due to its operations in the Gulf of Mexico and offshore Africa, which better align with Chevron’s portfolio. She noted that these assets only comprise 15% of the deal’s value so they weren’t as material as it may appear.

Now what

By taking its offer public, Occidental Petroleum made it clear that it’s not giving up on its pursuit of Anadarko. That could yield one of the following potential outcomes:

Anadarko could stick with its current agreement with Chevron.

It could break off that deal and accept Occidental’s bid.

Chevron could increase its offer.

Given Anadarko’s rally today, investors seem to think that one of the latter two alternatives seems more likely.